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Morocco: Morocco

Guide to the Risk and Opportunity Ratings

At the end of each country profile, we have given a risk rating and an opportunity rating. These ratings are a summary of our analysis indicating the levels of risk when investing in a market and the level of opportunity to profit from it.

The ratings themselves are simple. Both work on a scale of one to five. The opportunity rating is indicated by the $ symbol. A single $ equals a low opportunity whilst 5 of them ($ $ $ $ $) equals the highest opportunity ranking.

For risk we have used the * symbol. A ranking of * equals a low risk rating whilst * * * * * equals a high risk rating.

Introduction

Morocco, with snow topped mountain peaks, white beaches, undulating hills and old towns bustling with life, has an enduring appeal which has attracted people from all walks of life. Famous names that have fallen for the country include Winston Churchill, Jean Paul Gaultier and the Rolling Stones, among others. The number of British holidaymakers going to Morocco in 2004 increased by 20% showing a widening of Morocco’s appeal. As Europe’s ‘Gateway to Africa’, Morocco enjoys long-established trade links with the UK, and commerce between the two countries has increased three-fold in the last decade alone, making the UK Morocco’s second-biggest investor.

In fact, the tourist industry produces 7% of Morocco’s GDP and employs almost one million people, qualifying it as the second-largest source of income in the country. This looks set to increase rapidly under the government’s Vision 2010 plan, through which infrastructure and resources are being improved. 80,000 hotel rooms are being constructed (creating 600,000 jobs), and visitor figures are set to reach 10 million before Morocco’s acceptance into the Euro-Med free trade zone in 2010. Six new coastal resorts are also under construction, with facilities including 5-star hotels, golf courses, apartments, villas and spas.

The last five years have seen a considerable rise in the number of foreigners buying houses in Morocco, and Moroccan property agents have predicted that British buyers will be the biggest contributor to the market over the next five years. This is partly due to the fact that King Mohammed VI is actively encouraging foreign investment, and, in 2001, changed the law to allow foreign investors to take proceeds of property sales out of the country. The government has created the Investment Promotion Unit in order to attract further foreign investment and does not legally differentiate between foreign and domestic investors. In the last four years, sales have increased by 280%.

Is this a good place to buy?

An hour’s ferry ride from southern Spain, Morocco shares the attractions of the Costa del Sol without its high cost of living, its overdevelopment or its crime rate. The Moroccan cities of Marrakech, Casablanca, Fez and Tangiers throw up images of the hippy trail, and the population, a mixture of Africans, Berbers and Arabs, are unrivalled in their hospitality. House prices are much lower than they are in Europe and represent extremely good value for money – the market has been compared to that of Spain twenty years ago. On top of this, the country enjoys 300 days of sunshine per year, allowing for a year-round tourist market with excellent rental opportunities.

In economic terms, Morocco also provides good reasons for investment. The country has free trade agreements with both Britain and the US, a fact which is boosting foreign direct investment. The Moroccan currency is relatively stable, with a foreign exchange rate anchor and a well-managed monetary policy, and inflation rates have been held to the levels of industrialised countries for the last decade. According to World Bank and IMF reports, the dirham has appreciated by 18% in real terms since 1990, unemployment is falling and private consumption, imports and exports have all increased. GDP growth in 2004 reached 4.4%, but dropped in 2005 to 1.8% due to substantial increases in wage levels and oil subsidies. The government predicts recovery in 2006, and gaining membership of the Euro-Med Free Trade Zone by 2010 together with the work being put into this should provide a significant boost to the economy.

Along with the year-round rental potential mentioned above, other attractions for investors include a lack of any restrictions for foreign purchasers, familiar conveyancing laws, based on the French system, and the possibility of buying architecturally unique property. Financing is available, and capital growth is currently at 15% per annum. Capital gains are taxed at 20% for the first five years after which it is reduced by 50%, and it disappears altogether on properties held for over ten years, making Morocco a strong long-term investment. The country has a dual tax agreement with the UK, and there is no inheritance tax and no tax on rental income for the first five years. These factors, together with the possibility of repatriating 100% of profits as long as the initial payment is made in hard currency, mean that Morocco offers a lot of potential to the property investor.

Price history

Morocco offers properties for all budgets, from £10,000 to £1 million. Prices for luxury properties have been rising for thirty years, pointing to strong European interest in the property market here, consistent demand and low vacancies in holiday lets. Morocco is a relatively new market for foreign investment, as it is only for the last three years that investors have been allowed to export profits from the sale of residential property, and though prices have been rising at around 15% per annum, it is still possible to buy a large villa which would cost £500,000 in Spain for around £180,000 outside Tangiers.

More pages

Page 1: Guide to the Risk and Opportunity Ratings
Page 2: Which type of property should you go for?
Page 3: Key risks and opportunities

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